FINRA Expungement Award:

Illinois Financial Advisor Expunges 10-Year-Old Customer Complaint

 

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Award Date: March 20, 2021
Hearing Site: Indianapolis, Indiana
Respondent Firm: Securities America
Claimant Representative: Dochtor Kennedy, MBA, J.D.


Case Objective:

An Illinois financial advisor who has been in the business since 1995 finally expunged a ten-year-old FINRA record of a customer complaint related to the global settlement of Medical Capital Corporation (MedCap) promissory notes. Following the customer’s investment, MedCap was charged with fraud by the SEC and found to be a Ponzi Scheme. The customer had alleged $200,000 in damages, and the matter was settled in 2010 for just under $50,000.


Case Summary:

The customer had conducted his own due diligence into MedCap investments. He wished to diversify his portfolio while minimizing risk, and MedCap boasted a 14-year track record of never missing an interest payment. The customer independently invested a portion of his portfolio to the MedCap notes. When MedCap stopped paying dividends and was later charged by the SEC, the customer lost the entirety of the invested principal. It was at that time that the customer lodged a complaint alleging the investment that he had independently chosen and researched was misrepresented by the financial advisor.


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In order to avoid the cost of litigation, the advisor’s firm had settled the case for approximately 24% of the damages requested. None of the settlement amount was contributed by the financial advisor.


Result:

The Arbitrator found that all claims and allegations made by the investor were false or erroneous under FINRA Rule 2080. AdvisorLaw was able to show that the customer had extensive investment experience and that thorough due diligence had been conducted on the investments prior to purchase. The investments in question had been in line with the customer’s stated investment objectives and goals. Furthermore, it was pointed out that the financial advisor himself had lost a portion of his own money due to the illegal scheme perpetrated by MedCap. To further illustrate the lack of ire between the advisor and the customer, they continued their financial relationship for many years following the event.

AdvisorLaw won another case, and the financial advisor was able to polish his tarnished reputation. The removal of the complaint from BrokerCheck and the CRD ensures that potential customers will no longer view a Ponzi scheme-related disclosure and infer that the advisor participated in the fraud.




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